Author: Ana Hernandez

Categories
Flipping

House Flipping Business Plans: How To Create One (with Examples!)

A rehabilitated home in North End, Detroit
Source: Detour Detroit

Flipping real estate makes for a great reality TV show, but it can also be a lucrative investment strategy if you know what you’re doing. What they rarely show on screen, however, is the importance of having a business plan for flipping homes—one that we’ll provide for you in this article.

Read on for our house-flipping business plan template!

The Ultimate Business Plan Template: Planning for Success

The goal is to build a solid foundation that serves as your living roadmap for your house-flipping empire. Only when you have the goals and action steps in place can you put yourself toward investment success, attracting real estate investors, financial partners, and home buyers to work with your company.

Here are the 8 steps you need for a thorough house flipping business plan:

Step 1: Mission & Vision Statement

Start by creating your mission and vision statement. Change the following placeholders:

[Company Name] [what you do] [what you offer] to [who your customers are] with [your benefits, e.g., faster, more reliable, lower cost].

Here’s an example of a great house flipping business plan:

Flipping Fortunes finds, fixes, and sells fixer-upper homes to investors and homebuyers in the City of Detroit. Unlike other companies, we are Detroit locals and partners of Logical Property Management company that has been operating in the area for more than two decades.

Step 2: Products & Services

Next, list down all your company’s services and support each title with a short description. Here’s what it may look like for Flipping Fortunes, the fake house flipping business we used earlier:

Flipping Fortunes will provide these services for investors and home buyers in Metro Detroit:

  • Complete property restoration or renovation: Our team will scout, inspect, budget, and manage property flipping projects from start to finish. Home buyers and property investors can then purchase affordable, quality homes at a fraction of the cost of a newly built home.
  • Professional assistance for house flipping projects: Our team will help real estate flippers and DIY home flippers with everything they need to complete their flipping projects, including connections to professional inspectors, licensed contractors, and experienced real estate agents.

The more details you can add, the better. After all, interested real estate investors and financial partners will want to know everything your company can provide for them before engaging and signing the dotted line with you.

Step 3: Management Team

In this section, you want to explain more about the “who” of your business. Is your team composed of knowledgeable and experienced real estate experts who’ll live up to your company’s promise?

Here’s a quick example:

  • John Doe, CEO: Licensed real estate broker and property manager for the past two decades. Doe began as a real estate wholesaler before spending most of his career working with several agencies and property management companies. In all of his ventures, he always specialized in house flipping projects, having now flipped more than 250 projects.

Be sure to include each individual’s expertise, experience, knowledge, and everything else that can prove their capability and solidify their role. The higher you can lift your team members, the more trust you’ll gain as a company.

Step 4: Success Factors

Next up, what needs or specific niche are you addressing in the particular real estate market? These things are crucial for getting financial partners to join your venture, convincing them ‌you have a great business idea on hand.

Here’s an example of what a success factor could be:

Flipping Fortunes addresses the growing niche within the Metro Detroit real estate market. Our team opens opportunities for valuable fix-and-flop projects, making it easy for investors and home buyers to get their slice of the confusing yet high-performing hotspots in the tri-county area.

Pro Tip: You can also conduct a SWOT analysis to get a clearer picture of your strengths and weaknesses as a company.

Step 5: Target Market

As with any business, your house flipping company’s success depends on the supply and demand, as well as the cost of labor and value appreciation of the renovations. You don’t want to offer your services to a place that doesn’t need them.

Instead, your goal is to identify where you can “sell” most of your flipping services to a large market for many years to come.

Step 6: Business Entity

To operate your business legally, ‌choose a business entity and register for your business in the state you’ll operate in. There are many business entity types to choose from, but we recommend that go with one that has limited liability protection, like an LLC or corporation.

Liability protection is crucial for a house flipping business, as there are many things that can go wrong. For example, someone can sue your company because of a property you’ve flipped—where you’ll want to ensure that your personal assets remain protected.

Pro Tip: Consult with a business attorney to learn your options and weigh them accordingly.

Step 7: EIN, Insurance, Permits, & Licenses

It’s also important to ensure that you have the required documents to run your business. Oftentimes, banks and private investors will want to see this anyway. After registering your business, go through the following processes before officially starting operations:

  • Register for an employer identification number (EIN), which you’ll use for tax purposes, applying for business loans, or apply for business bank accounts and credit cards.
  • Look into business insurance options, especially if you’re going to hire employees. You’ll need workers’ compensation, unemployment, and disability insurance. Moreover, research about general liability and commercial property insurance to protect your assets.
  • Obtain the property business licenses and permits for your state and scope of work. You might need to get several permits to work in the construction business. You can also check with your local chamber and business attorney to ensure that you have the complete paperwork.

Step 8: Financial Summary

Lastly, ensure that your flipping business will generate high returns—both for you and for your investors. Here are a few ways you can get financing:

  • Through friends and family loans: Also called Patient Capital, this is when you fund your projects with personal loans from family members, friends, or partners. It’s low stakes and an easier route than traditional bank loans.
  • Tapping into your 401(k): If you don’t plan on retiring ‌soon, you can take a loan out of your 401(k)—either from the classic 401(k) loan or a ROBS loan.
  • Combining financing options: You can also find success in using several financing options to purchase and renovate your properties.

Start Flipping & Start Generating Profits

As your company grows, the projects will naturally increase in complexity and number as well. That is why having a business plan is important, especially if you want to attract investors. Your investors should see that you do your due diligence before putting any money on the line.

Have any more questions? Drop them in the comment below!

Categories
Landlords

2022 Real Estate Forecast for Rental Property Investors in Detroit

Sign that says House For Rent in front of a building
SOURCE: Ian Samkov on Pexels

The US real estate market experienced a wild ride in the last few years, but things have started to settle down.

Many experts and agents forecast that normalcy is around the corner, especially since there was an increase in new listings with a small drop in closed sales in Southeast Michigan in 2021 compared to the previous year.

In the City of Detroit, the news is even better—total sales went up by 8.8% year-over-year.

Right now, Motor City is presently a renter’s market. The City of Detroit has seen an increase in renters vs homeowners, with renting households accounting for 44% of occupied housing units—growing by 35% over the past 3 years.

This is great news for landlords, as it means the tenant pools are increasing in size.

So, what’s in store for rental property investors in the City of Detroit? Let’s take a look.

Employment on the Up, Better Rental Prospects

The population of born-and-bred Detroiters has declined. However, we’re seeing plenty of working-age adults moving in, especially with opportunities opening up.

Just take a look at these statistics:

  • Employment growth is up 1.18% year-over-year in the city of Detroit.
  • The greater Detroit-Warren-Dearborn area saw an over-32% increase in GDP.
  • The City of Detroit is looking at a forecast of 29.31% rate for job growth and a 4.7% rate for job gain.

This shows positive trends for employment in the City of Detroit. And more people with jobs means more renters who are financially stable to afford beautiful rental properties. Moreover, it’ll help increase your occupancy rate so you can recoup your capital in a short time.

Affordable Homes with Increasing Sales Prices

As of July 2022, the median list price for homes is only $80,500, with median sales prices at $75,000. The median number of days spent on the market is a little high (85 days), but that’s already an improvement from the 143 days back in February 2022.

Currently, homes in the City of Detroit go for 11.5% below the asking price as of July 2022, but it’s worth noting that median listing and sales prices have already skyrocketed. Back in March 2022, the median selling price was $54,500. This shows a 137% increase in sales price in just a few months.

The stats show that Detroit’s property market is recovering steadily, heading towards pre-pandemic levels or better. For those looking to invest in homes, this is good news mainly due to two reasons:

  1. Healthy rent-to-price ratios, as you can easily purchase below-$100k homes and rent them out for at least $1,000 monthly. You’ll generate positive cash flow from the get-go and reap investment returns fast.
  2. Enjoy significant equity gains since you’ll purchase while the prices are still low. As home values in the City of Detroit continue to increase, you’ll steadily generate equity from rising property appreciation rates.

In short, now is the perfect time to invest in Motor City’s affordable housing market while prices are low. As the economy recovers and grows, your likelihood of renting and selling properties will only increase simultaneously.

simultaneously.

Emerging Opportunities to Invest in Condos

Meanwhile, in the urban areas of the City of Detroit, it’s also an excellent time to invest in condominiums. The greater downtown area suffered due to COVID-19, and inventory went down. But as businesses reopen and new developments continue, there’s a shift from a buyer’s to a seller’s market on the horizon.

Some key areas include Brush Park and North Corktown, with new developments breaking ground in 2022. We expect this will lead to a great economic boom for real estate investors looking to fill their commercial properties as well as more renter seeking condos in the heart of downtown.

Real Estate Forecast for 2022

It may be a renter’s market now, but as the city’s economy recovers, there could be a shift in trend soon. With the median listing price for homes still fairly low and the median sales prices increasing, there’s no better time to invest.

Overall, things are looking up for the real estate market in the City of Detroit, so catch the wave before you miss out!

If you’re looking to invest in real estate in the City of Detroit, hit us up at Logical Property Management! We’ll help you choose the best investment locations to maximize your returns.

Categories
Wholesale Wholesaling

Real Estate Wholesaling: How to Assure Sellers and Buyers That You’re Not a Scam

For sale properties on the west side of Detroit
Source: Crain’s Detroit Business

If you’re a real estate wholesaler, then you’re already aware that your success depends on the trust you build with potential sellers and buyers. Unfortunately, many scammers try to take advantage of people by misrepresenting their intentions or promising impossibly high profits.

As they’re on the way to the bank, the unfortunate wholesaler must deal with the fallout, which frequently involves unhappy clients and a ruined reputation. Nevertheless, there are things you can do to gain their trust, seal deals, and earn wholesale profits.

Here are 3 few things you can do to assure sellers and buyers that you’re a legitimate real estate wholesaler with their best interests at heart.

1. Know the common types of real estate scams.

Apart from posing as agents or homebuyers, some con artists go the extra mile by pretending to be home inspectors, lenders, or landlords. To protect your customers from fraud, familiarize yourself with common real estate wholesaling scams.

Besides protecting yourself and the people you’re working with, in-depth knowledge of common scams shows that you really know the ins-and-outs of the industry. Without a doubt, this will help build your reputation, where buyers and sellers will feel more confident partnering with an expert.

The Foreign Buyer Scam

In this real estate scam, the seller will usually receive an email from someone claiming to be a prospective buyer living abroad. Then they’ll say that they’re planning to move to the United States.

They’ll send a check for the down payment only to say that they accidentally paid too much and ask the seller to wire back the difference. Only later will the seller realize that the check is fake—they’ve received no money. By that time, the buyer will have vanished along with the cash that was “returned” to them.

The “Bait and Switch” Scam

This scam occurs when a prospective buyer makes an offer that’s above the property’s market value, its sale price, or both. The seller then excitedly accepts the deal, only to learn that the buyer isn’t signing the contract yet because of “delays”.

They eventually come back; although, this time with a much lower price and a list of demands. Unfortunately, the seller will have paid thousands in ongoing taxes, insurance, and utility bills by this time, and feel they have to honor the sale regardless.   

The Duplicated Listing Scam

Scouring through websites like Craigslist may lead you to great properties with incredibly low prices—but be warned! Some scammers copy legitimate rental listings and re-publish them with altered contact details and price tags. Unfortunately, some innocent buyers are so excited to grab the deal that they immediately wire a down payment to secure the purchase.

Needless to say, the scammer disappears upon receiving the payment, leaving the poor buyer with thousands of dollars lost and no property to show for it. They can try approaching the authorities for help but sadly, they often never get their money back.

2. Cultivate a robust online presence.

On the flip side, you want to show buyers that you’re not like the scammers we listed already. So, as a seller, you should establish a strong online presence is to convince buyers that you’re legitimate. After all, real estate scammers use fake names and likely won’t be as active on social media platforms.

Here are two ways to have an online presence:

  • Social Media: Create social media profiles on popular platforms like Facebook, Instagram, Twitter, and more to help prove your credibility and trustworthiness.
  • Website: Go the extra mile and build a website. Other than giving you a platform to display the properties you’re currently holding, you’ll also have a place to show past client testimonials, success stories, and positive reviews.

The more you cultivate your online presence, the more you can establish a strong brand and reputation. You also look more professional and differentiate yourself from scam websites that are often unorganized and hard to understand.

3. Avoid dominating the conversation.

As a real estate wholesaler, you’re probably aiming to grab all the opportunities you come across. There’s nothing wrong with this goal, but being too fixated on it could lead to being pushy or too eager when talking with buyers and sellers.

Instead, when speaking with buyers and sellers, stick to the basic facts—who you are, the name of your business, and how exactly you can help them. It’s completely alright to dig deeper and discuss their current situation and the property in more detail, but the key is to let them lead the conversation.

Constantly interrupting or talking over them will make you appear unprofessional and untrustworthy.

Build Trust, Land Sales, Earn Fortunes

Given how valuable an asset property is, buyers and sellers alike will only work with someone they trust. Therefore, if you want to land wholesale deals, you must focus on strengthening your brand and credibility. Only then will you find success in the real estate industry—one that’s largely built on trust.

Struggling to build trust with sellers and buyers? Our team of experts at Logical Property Management is ready to help!

We’ve been serving the Metro Detroit real estate market for more than two decades now and have everything you need to succeed in the area. We can help you with anything, from building an online presence to keeping track of your buyers and sellers.

Categories
Flipping

Flipper Insurance? Here’s What You Need to Know

A pair of carpenters need to work on house renovations
Photo by Annie Gray

By buying valuable properties at a low price point, you can set yourself up quite well. The better the deal, the better margin for your fix-and-flip projects—but there is always risk involved in the house flipping business. From carpenters dealing with heavy machinery to construction workers on ladders…

A flipping project can be a hotbed for injuries.

For example, over 30% of yearly ER visits in North America—or about 9 million visits—come from people falling off ladders. With danger constantly lurking on your worksite, you’re going to want some protection. And flippers need specific insurance that covers their type of work.

In this article, we will talk about the types of insurance you need when flipping houses.

What Kind of Insurance Covers House Flipping?

No one ever plans on things going wrong while flipping a house, but they do happen. That’s why it’s essential to have the right insurance in place. But regular insurance won’t cut it for house flipping, and homeowner insurance won’t cover it, either, because it’s considered a high-risk environment.

So how do you get good insurance coverage?

Well, you need to look into 3 types of insurance:

  • Dwelling Policy
  • Builder’s Risk Policy
  • General Liability Umbrella

Each insurance covers a specific area, which we will discuss in detail.

#1 – Dwelling Policy

A dwelling policy is an insurance that covers a vacant property under renovation from physical damage. Attached structures like garages and porches are also covered. Unlike homeowner’s insurance, a dwelling policy doesn’t include personal belongings, only the structure itself is insured.

With a dwelling policy, your property is protected against damage caused by:

  • Fire
  • Lightning strikes
  • Heavy winds
  • Hail
  • Explosions
  • Vandalism
  • Theft
  • Vehicular accidents

However, depending on your insurance plan, things like vandalism might not be covered. We will talk about the type of plans in a later section.

#2 – Builder’s Risk Policy

This type of insurance covers physical damage to the property during the construction process. Like the Dwelling policy, it will protect a home from the same sources of damage. Generally, the builder’s risk policy can be thought of as an add-on to the dwelling policy.

However, a builder’s risk policy includes additional coverage for the materials and tools needed to repair the property. With a builder’s risk policy, you can keep your building materials and tools safe from damage.

#3 – General Liability Umbrella

This insurance can cover you and your investors from liability for accidents and injuries caused during your home flipping project. For example, if a carpenter gets injured while working on your property and sues you for damages, the general liability umbrella can protect you against financial losses.

But keep in mind: The general liability umbrella only covers you, but not the workers and contractors you hired. This means that if they cause an injury while on-site, they won’t have insurance to protect them against liability.

The Different Types of Coverage

When you buy insurance, it comes in different levels of coverage to choose from. A basic package might have minimal coverage while higher levels of coverage can protect you more.

Generally, there are 2 types of coverages you need to consider:

  1. Basic coverage – This will cost less but will exclude protection from certain factors. For example, vandalism, theft, and water damage usually aren’t covered by a basic package.
  2. Special form coverage – This protects you from all sources of loss except for explicitly mentioned sources that are indicated in the contract.

Depending on your situation, you might need more than basic coverage. For example, if your property is in an area that experiences heavy snowfall—like Alta, UT, which experiences around 457” of snowfall annually—you should definitely get the special form coverage.

How Much Does Insurance Cost?

Unfortunately, there isn’t a clear-cut answer as insurance costs vary by region and other factors. Also, insurance prices have no direct link to property prices. Plus, the status of the location usually determines insurance. For instance, If an area is more prone to natural disasters, it will have higher insurance premiums.

Let’s take Detroit as an example. The area is susceptible to heavy rains and harsh winters, so insurance is more expensive in Detroit. The national average insurance price is $1,312 annually; meanwhile, Detroit’s averages are around $2,237 per year.

In short, depending on the location, insurance prices widely vary.

Protect Yourself From Liability While Flipping Houses

Flipping houses isn’t all sunshine and rainbows. Accidents can happen while rehabbing a property. If you’re not insured, you might be facing heavy losses due to lawsuits.

To avoid losing money—money better spent on your flipping project—to lawsuits and damages, get yourself insured. With a dwelling policy, builder’s risk policy, and general liability umbrella, you can protect yourself and your property from damage and losses.

Do you have any insurance tips for house flippers? Tell your story below!

Categories
Landlords

Top 3 Upcoming Trends of Short-Term and Vacation Rentals in 2022

An STR in the metro market
Photo by Andrea Davis

During the pandemic, STRs took a hit to their profits. Let’s take a look at some of the upcoming trends and the positive outlook facing STRs in 2022.

Before the COVID-19 pandemic, the short-term rental (STR) market was going strong. In fact, Airbnb reported a 33% increase in booking during February 2020—a month before the pandemic hit. In contrast, during the pandemic, STR bookings took a massive hit. By January 2021, Airbnb reported record low bookings, down 31% from their average.

It’s now 2 been years and we have to ask: Will the STR market recover?

While we have seen that people are becoming more willing to travel with COVID-19 restrictions slowly easing up, there are more than a handful of factors that affect the future of STRs. You’ll need to know these if you want to navigate the uncharted waters ahead.

Let’s take a look at some projections for the STR market in 2022 and beyond.

STR Trends for 2022 and Beyond

If you’re running an STR business, you’ll have to reevaluate your strategies to adjust to the changes. With how COVID-19 changed how we look at STRs, the market has adjusted to fit the new norm. Here are 3 of the biggest changes we can expect to see for STRs.

#1 – The Fall of Seasonality

Before COVID-19 made vacations impossible, it was fairly easy to predict when booking would increase.

For example, for a property located in the mountains, you’re likely to see an increase in tenants during the winter. For rentals located near theme parks or beaches, such as Orlando and California, you would see an increase in booking during spring and summer vacations.

However, thanks to the rise and familiarity of remote work (both for employers and employees), people are more willing to go on a vacation during off-peak seasons. In a May 2021 report, Airbnb recorded that 64% of respondents are willing to travel during off-peak seasons—making bookings highly unpredictable.

With people more willing to travel during off-peak seasons, bookings for vacation rentals might see sporadic bookings throughout the year. The number of total bookings might be roughly the same, but it won’t be concentrated on seasons.

To adjust to this, you should provide deals and discounts more frequently instead of focusing on seasons. Having regular weekend discounts can target the customers looking for bookings during off-seasons.

#2 – Recovery of the Urban Market

During the height of the pandemic, many people fled from cities to avoid the crowd. For instance, over 320,000 people fled New York City during the height of the pandemic, primarily to get away from crowded areas and retreat to more rural environments.

However, with the increased distribution of COVID-19 vaccines, people are returning to normalcy in terms of their comfort with meeting people. They aren’t as afraid of the crowds inherent to cities anymore as they were during the height of COVID-19.

In fact, New York City had an influx of  new residents starting in May last year. Plus, malls are reopening, more restaurants offer indoor dining, public transportation is returning to normal operations, and people are starting to repopulate the cities.

With people flooding back into the city, the need for accommodations will rise. Therefore, the urban market is looking to make a fast recovery—giving you the perfect opportunity to grow with it.

#3 – Longer Bookings Are Becoming the Norm

With the rise of remote work and online schooling (at least, for the meantime), people have changed the reasons for their vacations and, in turn, the duration of their rentals. The increase of flexibility with our responsibilities affected the length of everybody’s willingness to travel.

In a recent report, Airbnb showed that the number of people willing to book stays over 28 days has almost doubled. This is a great opportunity for your STR to adjust your pricing, provide duration-focused promotions, and meet the increased demand.

For example, offering a 10% discount for every additional week that they book can entice customers to choose your STR for a month-long trip. Even providing one free day for every successful referral can encourage people to give in to a longer vacation—and give you another guest to look forward to!

By providing customers with attractive deals for long-term bookings, you can:

  • Increase the number of visitors choosing your STR
  • Increase your occupancy rate
  • Increase and strengthen your rental income

Take Advantage of STR Opportunities in 2022

With travel restrictions lifting, the future for STR investments is looking brighter than ever. Our world is returning to pre-pandemic norms and the STR business is rebounding—if you use the opportunities wisely.

Take these trends into account and change your STR’s business strategy. Adhering to the market and behavior shifts will certainly strengthen and grow your profits as an STR owner, thriving in a market that people are looking for in 2022 and beyond.

Did you notice any other shifts in the STR market? Comment below and let’s get a discussion going.  

Categories
Wholesaling

Top 6 Ways to Increase Real Estate Wholesaling Leads and Grow Your Buyers List

Consistent lead generation is paramount to your success in the real estate wholesaling business. Finding a seller begins the wholesale process while finding a buyer closes the deal. 

However, generating valuable leads does not come easy. 

Even when you already have a long list of leads, you’ll still have to trim it down to the quality ones. After all, you don’t want to have just any leads—you want to garner high-quality leads to close more deals. And this can only be achieved by mastering the methods for consistent lead generation.

In this article, we’re going to tackle some real estate lead generation ideas so you can keep growing your buyer’ list. By having consistent growth in your buyers’ list, you can be confident that you’ll keep closing wholesale deals—and keep your income stream flowing. 

6 Ways to Generate More Leads

Generating leads in wholesale real estate requires diligence. That said, even a wholesaler’s time and effort are an investment. To ensure that your work pays off, you’ll have to work smart—not hard. 

For example, if your current method isn’t giving you the desired results, you need to try different lead generation strategies. Remember what Albert Einstein said, “Insanity is doing the same thing over and over and expecting different results.” 

And you don’t want to fall into that frustrating trap.

So, consider using these wholesale lead generation strategies to fill up your list, so you can spend time closing more deals.

1. Multiple Listing Service (MLS)

The Multiple Listing Service is an exclusive online database for licensed real estate agents, featuring properties available and sold on the market. What’s great about this is that it can automatically send leads to your inbox, among many other perks. More importantly, this real estate lead generation strategy is completely free—as long as you find access to it. 

Another benefit of this is that it can also connect you to other real estate investors in the market. As you grow your buyer’s list, you can also grow your business network.

Still, using MLS requires some dedication to be effective. Since a lot of agents use this strategy, posts can easily get lost among thousands. You’ll also need to go through many real estate leads until you find quality ones. 

So, yes, MLS comes with a few challenges. But, it’s comprehensive, affordable, and convenient—making it a terrific real estate lead generation method. 

2. Leverage Networking

Connecting with other real estate investors and helping each other out can keep you consistently closing deals. Now, some wholesalers are looking for sellers while others are looking for buyers. But by pooling together your resources, you can establish a mutually beneficial relationship. 

Nevertheless, this setup requires you to split profits. You’ll earn a bit less, which means you need more leads to compensate. This strategy is still great for growing your buyers’ list, as well as your network, so the pros outweigh the cons.

Apart from the real estate community, you can also look at your personal network. You never know which one of your friends or family members is looking to invest in. A quick post on social media sites or asking around might seal you some great—unexpected—deals. 

In other words, think out of the box and use your current network to generate wholesaling leads.

3. Cold Calling

This method is a popular one, as it kills two birds with one stone. By cold calling, you use your existing leads to generate new ones. 

The idea behind this is that people with similar interests usually gather together. Similar to how there is a network of wholesalers, there is also a network of buyers. So, take advantage of your current connections to see if they know others who are interested in your deals, even if they aren’t interested themselves.

Once you’ve identified some prospects, give them a quick call. Then, keep all of these individuals in mind and remember to follow up whenever you have something to offer. You can then continuously assess which ones are willing to make a deal, giving you very high-quality leads more willing to make a deal with you.

4. Drive for Dollars

Driving for dollars is a tried and tested strategy for real estate lead generation. There are many leads out there in the world—and sometimes all it takes is a quick drive around town to spot the right signs, literally. Yes, your car’s mileage will increase, but so will your buyer’s list.

Many real estate investors are also renters. In other words, you might find a house with “for rent” signs and contact details. 

Once you see these potential clients, give them a call to ask if they’re investors looking for properties. Investors are always looking for the next opportunity, so you might just get lucky and land on a willing prospect. And even if the person is an agent, that still works, because they might be looking for properties on the market as well.

5. Real Estate Agents

If there’s anyone that’s knowledgeable about the local real estate market, it’s the real estate agents. 

If you’re considering doing future investments in a certain area, a real estate agent can help you start. Real estate agents can be very helpful in building your buyers list and growing your own network. When you’re investing in a new area, they can help you close your first few deals by linking you to local sellers, investors, and properties in the local market.

Once you gain a grasp of the local market, you can start doing deals on your own. Alternatively, if you establish a good business relationship, you can even consider becoming long-term business partners. Real estate agents won’t only help you grow your buyers’ list, but they can help you land consistent deals.

6. Bandit Signs

Bandit signs are poster-sized signs with a short, direct message and contact details. You usually see a dozen of these signs near a property, often in high-traffic areas like local markets, shopping malls, and busy streets. It’s a common practice in real estate since it’s an effective form of real estate marketing. 

After all, leads can come from all sorts of places. And this method is a great way for you to cover multiple areas and expand your reach. Also, it’s usually quite affordable to put up bandit signs making this a more cost-effective way to strategically grow a buyer’s list.

Conclusion

Real estate wholesaling takes time, effort, and commitment. As a wholesaler, you have to strategize, think ahead, and be ready to face challenges head-on. Yes, generating wholesale leads does take a lot of work. But if you do it right, all that hard work pays off. The more leads you generate, the higher your chances of closing deals. 

With these strategies at your disposal, you’re now ready to generate consistent leads to propel your real estate wholesaling journey to the next level.

Got tips of your own or stories to share? Let us know in the comments below!

Image courtesy of RODNAE Productions

Categories
Shortterm Rentals

Feeling Invisible? Here’s How to Manage Multiple Airbnb Listings for Increased Visibility

Airbnb owner on her cell phone

As COVID-19 slowly loosens its grip on our society, Airbnb’s popularity is reemerging from the ashes. 

While the company saw a 72% drop in its services at the height of the pandemic, Airbnb is now seeing an increase in bookings once more, thanks to significant restructuring.

With this post-pandemic growth, short-term rental landlords are now looking at ways to optimize their vacation rental business to take advantage of the boom. And, more importantly, stand out from the competition. 

One of these techniques is using multiple Airbnb accounts for your various properties, as we’ll see in this article. Of course, there are a few things to keep in mind, but the strategy proves to be a great way to show up more in Airbnb’s search results, increase your property’s visibility, attract more guests, and secure more bookings.

Let’s take a closer look.

Can I Have Multiple Airbnb Accounts?

You may be thinking, “Is it even legal to list the same property on multiple Airbnb accounts?” After all, you don’t want to go against any of Airbnb’s rules and regulations and risk getting banned altogether. The company can track single IP addresses or cross-reference your contact information to prevent its users from having  multiple accounts

Since they do regularly crackdown on users trying to flood Airbnb listings with the same property, we advise against it. However, if you have multiple properties, then you can have a different account for each different property. 

While it is a lot more work, it can be alright if you are operating an Airbnb business with different properties in vastly different areas. We’ll explain why you might do that in a bit. 

Of course, if you don’t want to deal with multiple accounts for your listings, consider posting your properties on multiple platforms instead of just Airbnb. There are plenty of other options today like VRBO, Booking.com, and TripAdvisor. You can even try social media sites like Facebook and Instagram to expand your reach.

Next up, let’s explore the situations where you can have multiple Airbnb accounts. 

When Should I Have Multiple Airbnb Accounts?

As we said, Airbnb doesn’t allow users to manage multiple accounts for the same listings. Although, managing multiple accounts for other situations can be beneficial for your short-term rental properties. Keep in mind, this advice is for people with multiple properties.

Now, here are a few reasons why you might need multiple Airbnb accounts, you can:

  • Have separate accounts for the properties that are in different locations. They’ll have unique addresses that will help potential guests see that your rentals are in a specific area, rather than thinking you’re spread across multiple locations (and might not have expertise in the local area). Plus, if you have Superhost status and get a bad review on a different property, it won’t affect your status on your other accounts.
  • Have separate accounts if you’re running a property management company. This way, your team can oversee several properties across the Airbnb platform. You can have one account for guest bookings and another for hosting services, although this might complicate things for your team.

As you can see, there are some cases where you have multiple Airbnb accounts. But, make sure that you are always following the rules on the platform, so you don’t get banned and miss out on additional income. 

How Can I Manage Multiple Airbnb Accounts?

Now, managing multiple Airbnb accounts isn’t easy. You’ll have to figure out a way to do the following across different accounts, logging in and out of each profile to:

  • Stay on top of your messages and communication with guests
  • Update your calendar to avoid double-bookings
  • Change your prices, post new information, or pick new photos for your listings

It’s a lot to do, but you can use smart tools to streamline daily property management operations and control the many aspects of your short-term rental business. 

Here are a few ways to do so:

  • Hire a property management company to handle properties on your behalf. Get in touch with us if your short-term rental properties are in the Metro Detroit area!
  • Use a vacation rental software solution like AirGMS to automate operations.
  • Bring in a co-host to double your workforce and combine Airbnb techniques.

Follow these tips to help you take care of multiple Airbnb accounts and lessen your chances of going against Airbnb’s rules. Additionally, having a property management company or co-host means you’ll be logging in to Airbnb via different IP addresses, which helps your case.

Level Up Your Airbnb Strategy

Take the time to consider whether you can manage different Airbnb accounts and if it makes sense for your portfolio of short-term rentals. The better you plan for it, the greater the chances of your properties ranking higher in Airbnb’s search results—being more visible to potential guests.

Once everything is running smoothly, you can sit back, relax, and watch your bookings increase alongside Airbnb’s post-pandemic revival. 

Got any thoughts on this listing strategy? Comment down below, and let’s get a conversation going.

Image courtesy of Andrea Piacquadio

Categories
Shortterm Rentals

How to Diversify Your Short-Term Rental Portfolio

Investing in short-term rentals (STRs) requires you to apply one of the main two schools of thought that exist when it comes to real estate investing in general:

  • Diversifying: Balancing risk and reward by spreading out investments across varied property types, locations, classes, and strategies.
  • Specializing: Focusing on investing in the same property type—repeating what you’ve found successful without spreading your resources too thin.

Both strategies are valid approaches to grow your portfolio. One focuses on horizontal expansion, while the other does it vertically. While investors tend to stick with one over the other, there is a way to have a hybrid—focusing on STR investments across different locations but keeping just to one specific asset class. Doing this can help you mitigate risks while focusing on one property type of your choice.

Before you set out to diversify your short-term rental portfolio, let’s look at the benefits of this approach.

Why You Need to Diversify Your STR Portfolio

There are two primary reasons why you need to diversify your STR portfolio: 

  1. To remain resilient in the market, especially with the unique rhythm of vacation rentals. Compared to long-term rentals that give consistent income year on year, the income generation of STRs is highly dependent on the season, the location, and their respective peak times.

A lake house will attract more guests in the summer, a log cabin near a ski resort will be profitable in the winter, and homes near Disneyland will be in high demand during school vacations.

  1. To meet the rising post-pandemic demand, where travelers are now seeking alternative accommodations to minimize human interaction and maximize flexibility.

In fact, the bookings’ reservation volume this year is now 400% higher than 2020 and 50% higher than 2019. With this increase in demand comes higher prices as well, where STRs are charging 20% more than they did last year.

As an STR investor, you want to protect your portfolio and capitalize on the growing demand—expanding your coverage to include rentals in other locations and of different class levels.

How to Diversify Your STR Portfolio

Now that we’ve discussed the benefits, let’s look at two ways you can diversify your portfolio. One way to diversify is opting to have STRs in multiple locations, which can bring more stability to your investments.

Diversifying By Geographical Location

While the STR demand in one city might be booming, another might be slowing down. By having investments in different locations, you can take advantage of a market’s natural ups and downs for a more stable and consistent revenue flow.

For example, take a look at how Big Bear Lake, South Lake Tahoe, Gulf Shores, and Sedona performed vastly differently over a two year period (thanks to seasonal demand, among other factors):

Source: AirDNA

If you have STRs in only one market, the success of your investments will completely be at the mercy of that market’s performance. Instead, consider spreading your investments across different geographical locations, so you’re not vulnerable to the same risks simultaneously.

In choosing where to spread your investments, AirDNA shares a list of different markets that covers the key factors of a successful STR investment:

  • Growing rental demand: Where the annual occupancy of rentals and listing growth rates are increasing. A good number means the STR and travel demand in the market is healthy.
  • Financial viability: Where you compare the home value to the average income of other STRs in the area (e.g., Airbnbs) to evaluate the rent-to-price ratio. The rule of thumb is to make sure that the monthly rent you can charge is at least 1% of the purchase price.
  • Increasing revenue growth: Where the income earned from STRs increases over time. You can calculate this by looking at the year-on-year change of revenue per available room (RevPAR) for the rentals that were booked in both time periods.

Here are some locations to consider, based on AirDNA’s top performers for these metrics:

Source: AirDNA

Diversifying By Asset Class

Generally, real estate asset classes are divided into four letter grades: A, B, C, and D. While these scores refer to property condition and neighborhood livability, it also describes the type of guests or tenants you’ll attract:

  • Class A properties: These are the most expensive and best-maintained homes in the market. They attract guests and tenants who can afford to live in luxury and enjoy the special features available in the property.
  • Class B properties: These are slightly smaller and more affordable than class A properties, but are still well-maintained. They attract those who want a pleasant place to stay without spending too much money.
  • Class C properties: These are reasonably maintained and decent homes. When times are tough, guests and tenants who used to stay in class A or B options might opt for class C instead.
  • Class D properties: These are older homes in areas that guests find less favorable to stay in. Aside from being in a more dangerous neighborhood, class D homes are likely far from shopping areas or grocery stores. Typically, they don’t make profitable STRs.

There are specific asset types to consider for Airbnbs as well. Properties are not divided into the same letter grades, but are categorized according to the type of guests they’ll attract:

  • Unique Stays: These are unusual but beautiful places to stay for a vacation. Whether it’s a yurt in the woods or a houseboat in a scenic lake, unique stays will attract guests looking to splurge on an adventure.
  • Entire Place: These are typically whole houses where guests have complete privacy to enjoy amenities and other activities exclusively.

Since these can be the likes of single-family homes, you can keep the letter grades in mind to diversify your “entire place” offers.

  • Private Room: These are single rooms in a bigger property. These listings attract guests who have no problem with shared spaces, such as kitchens and bathrooms. Travelers passing through the city or students on a budget tend to choose these.
  • Shared Room: These are similar to private rooms, except the guest can have another person sharing the room with them. These options often attract guests who are younger and more budget-conscious, like backpackers. 

The list is not exhaustive, but it shows how STRs are attractive to guests with varying budgets. Based on how guests generally respond to economic changes, it’s safe to assume that higher-class or luxurious properties would fare better in good economic times, while lower-class or budget ones will become necessary in tougher times.

The bottom line is you should consider the guests’ needs and preferences to diversify your STR portfolio and remain profitable in all parts of the market cycle.

Conclusion

The goal is to diversify your STR portfolio to appeal to a broader base, creating more stable revenue streams in your investment model. Doing so will help you weather market cycles and peak seasons, helping you meet the increasing demand for STRs in the post-pandemic world.

Any other tips on how to diversify a portfolio that’s focused on STR investments?

Image courtesy of Alexandr Podvalny

Categories
Landlords

Should Tenants Be Allowed to Make Home Improvements?

Nothing is worse than having a tenant who took “please feel at home” way too seriously.

While some tenants will only install their own wall decor or child safety latches on kitchen cabinets, some tenants make more permanent changes to the rental without your permission. This creates a whole lot of trouble—broken lease agreements, depleted security deposits, and costly restorations when they finally move out.

So, should tenants be allowed to make home improvements in any circumstances? Let’s look at some considerations.

Common Home Improvements to Expect from Tenants

Here are some examples of rental property alterations often done by tenants:

  • Painting the interior walls
  • Changing light fixtures
  • Changing appliances
  • Installing new locks on doors
  • Upgrading security systems
  • Changing the landscaping/garden

While these changes may be considered an actual improvement or upgrade to the property, you need to ask yourself the following questions before allowing them:

  • Will your tenants do a good job? They may not have the skill to carry out the project and may not adhere to safety or industry standards.
  • Who will pay for the improvements? They might expect a decrease in rent due to work done and materials used—even if the changes made are not up to par. 
  • Can you reverse the renovation? It’s possible that they deviate from the purpose of the original design (e.g., laminated floors are easier to clean than hardwood, simple landscaping is easier to maintain, etc.), which could require reversals in the future.
  • What does the lease state? Allowing them to break agreements might lead to them pushing their luck—further ignoring other clauses beyond just home improvements. 

You need to remember that your rental property is an investment—one that you should take ownership over, improve, and maintain according to your standards. Moreover, your tenants should see the importance of adhering to the contract and, ultimately, respecting you as their landlord.

What to Do If They’ve Done It Already

Should you discover that they’ve already made the improvements without authorization, here are three steps that landlords should do:

  1. Send a written notice of the home alteration, expressing your disappointment that they did not notify or seek permission before implementing the changes. Point out the specific lease clauses that they have violated.
  2. Warn the tenants that there should be no further changes done to the property without permission and that you’ll happily consider any changes they might still want to make.
  3. Outline the consequences of their action. This could range from just a fair warning to requesting that they reverse the renovation made—at their expense. If the alterations are extreme, you can deduct the cost from their security deposit upon Move-Out or proceed with eviction due to lease violation.

How to Prevent Tenants From Making Unauthorized Home Improvements

As they say, prevention is better than cure. So if unauthorized home improvements have been made by your tenants, make sure to review the lease agreements. Ensure that the following lease clauses are clearly stated:

  • Improvements that can only be done by the landlord or with landlord’s written permission
  • Improvements that can be done by either party
  • Consequences for alterations that devalues the property

Your goal is to create a space for tenants to freely improve their living conditions while being firm and clear with the boundaries. Even if you lucked out this time and the tenants did a great job improving the home, an unclear lease will open you to future problem alterations…and your luck may just run out.

Conclusion

Every rental property will need renovations and improvements from time to time. From repairing to re-flooring, landlords need to stay on top of their rental properties and make the necessary renovations when needed.

If your property can use a bit of work and you see that the tenants are capable of doing a good job, you should have no problems allowing them to improve the space. The bottom line is to make sure that they understand the boundaries and adhere to your lease agreements, and you should be good to go.

Do you allow your tenants to make home improvements? What are your non-negotiables? 

Image Courtesy of Polina Tankilevitch

Categories
Flipping

How to Find the Ideal General Contractor to Flip Houses

Finding a general contractor (GC) for your house flip can be challenging.

You want someone who knows what they’re doing, is trustworthy, has affordable prices, and has good reviews. This means you need to do proper research before hiring a general contractor—don’t hire the first one you find!

As a flipper, your main goal is to earn a high flipping profit in return for your investment. To do that, you need to renovate the house within a specific budget and timeframe, which means using contractors who stick to deadlines and understand the importance of flippers’ margins.

While simple repairs are easy to budget for and can be done within a month, more complex renovations can easily incur budget overruns and take more than a couple of months to complete. In these cases, it’s best that you hire a general contractor to handle the project for you, or assemble a team of go-to contractors that you work with regularly on your flipping projects. Which you go for will depend on your needs, but this article focuses only on general contractors.

Let’s go through some best practices for finding the ideal general contractor for your flip projects.

Independent Contractor vs. General Contractor

Before we go any further, it’s important to make a distinction between independent and general contractors:

  • Independent Contractors: These are contractors that you directly contract to perform tasks on a contractual basis. They complete the project themselves, without the help of subcontractors.
  • General Contractors: These are also directly contracted; however, tasks are subsequently contracted to subcontractors to complete. They complete the project along with their subcontractors instead of completing the project by themselves. They also handle all the administrative tasks needed (e.g., paying subcontractors, securing building permits, getting insurance for all workers, etc.).

General contractors will coordinate with necessary subcontractors on your behalf and oversee the project for timely and on-budget completion. They are ideal for major renovations and flips, because you can get all aspects of the renovation handled by a single entity.

What to Look for in a General Contractor

Here are the key things to look for in a general contractor:

  • A Good Reputation: The best way to find a general contractor is by asking for recommendations. Contractors work largely based on referrals. Ask your friends and the real estate community if they can vouch for somebody reliable, communicative, and punctual.

Once you have a list of options, go the extra mile to read online review websites and visit the Better Business Bureau to check their reputation and ask about the projects they’ve worked on before. 

  • A Good Contract: Hiring a GC on a handshake is not a good idea. You’ll want a contract that spells out what they will do and what you will do, with deadlines. The more thorough the better! Otherwise, there’ll be no accountability and your project can go sideways quickly.
  • Appropriate Payment Practices: A good general contractor will accept payments in the form of checks and wire transfers. They would also agree to sign a lien release before payment and negotiate with you on the payment schedule.

Stay away from contractors who want you to pay in cash or a lot upfront. Cash payments are not illegal; however, contractors who ask for them might be avoiding paying income taxes. This is a practice done by less-than-reputable contractors. Moreover, a down payment of 30% of estimated costs is typical to cover an initial retainer and materials, but an established contractor won’t need your full payment to start the job.

  • Local Coverage: Hiring a general contractor who lives and operates within the area of your flip is your best option. They will know the local building codes, city inspectors, have a network of subcontractors ready to help them, and you can easily contact them in the event of an emergency.
  • Proper Licensing: General contractors need to be licensed to pull the necessary permits for your property. Without these, your property won’t abide by the local building codes or pass inspection. You’ll end up financially responsible for bringing up the property to the required standards.

Instead, verify their license by asking for the license number. Check it with your state’s licensing board. For licensure information in Michigan, visit the state’s Department of Licensing and Regulatory Affairs website for details on the Bureau of Professional Licensing’s requirements.

  • Proper Insurance: General contractors should be insured for General Liability Insurance and Workers’ Compensation. You can ask to see a copy of their policy and call up the insurance company to verify the information. The insurance should be current and have clear policy limits for you to check. You should also be added as an “additionally insured” on their policy, until your project is complete.
  • Warranty in Writing: General contractors should provide warranties that cover the work they’ve done in your property. A warranty assures them that they won’t be coming back for multiple repairs over an extended period of time (warranties typically last one year only) while guaranteeing you a good renovation result.

This list isn’t exhaustive, but it’ll put you on the right track in finding your ideal general contractor.

Questions to Ask During the Interview

As part of the process, you should also have an interview with the general contractor. Here is a list of questions you can ask to help you identify those who’ll fit your criteria:

  • How many people work for you? How long has your crew been working together?

You want to work with an established company that has a large team of managers and assistants.

  • Where are you operating, and what is your service coverage?

You want to work with a local company that knows its way around renovations in the area.

  • What similar past projects have you completed?

You want to see their experience concerning the project you’re giving them. If they’ve never done what you need them to do, ask them how they will approach the project.

  • How do you communicate with your clients?

They should give you daily or weekly progress reports with photos and send itemized, detailed quotes and invoices.

  • For this project, will you be using subcontractors or just your own team?

If they are using subcontractors, make sure that all workers are trained, licensed (if applicable), and insured.

  • Are you licensed and insured?

Licenses should be updated and registered in the state where your property is situated. Insurance should include General Liability Insurance and Workers’ Compensation.

  • What would our contract look like?

Not all general contractors will have contracts. If they don’t, you can draft one up. Regardless, have your lawyer review it before everybody signs.

  • Will you provide warranties?

Make sure the warranty is written down and will conform to the requirements of the contract.

  • How will the payment schedule and plan work? Will you agree to sign lien releases?

Agree and sign the payment schedule before the job begins. They should agree to sign lien releases before payment.

  • Have you ever had to deal with lawsuits?

If they’ve been sued, ask what happened and how they handled it. If they’ve sued a client, ask for further information and check public records. If they’ve had serious accidents before, ask how they dealt with the situation and what they’ve improved to make sure it doesn’t happen again.

Conclusion

We hope this article is enlightening and helpful in your search for a general contractor. It might take a lot of effort, but having a reliable and skilled general contractor will protect your budget and timeline for a successful and profitable house flipping project.

The better your general contractor, the more houses you can flip fast, at the highest quality, and for the most competitive price.

Any additional tips for finding the ideal general contractor as a flipper?

Image courtesy of Andrea Piacquadio

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